LISBON (Reuters) - Oil company Galp entered into an
agreement on Thursday with the Portuguese Engineering,
Technology and Innovation Institute in order to research and
produce biofuel from algae.

Galp said the venture would establish a pilot plant at its
refinery in the coastal town of Sines, where it would produce
microalgae-based biomass and vegetable oil using combustion
gases captured at the refinery.

Algae has been identified by scientists as a potentially
far more efficient source of biodiesel than land crops. Its
production into fuel could address the problems associated with
crops for biodiesel, which require land that could be used for
food crops.

"The project will attract the participation of
internationally renowned scientists and may lead to the
establishment of a cluster for the production of sustainable
biofuel on internationally competitive terms," Galp said in a
statement.

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It said the project should give Galp a "front-running"
position in the commercial exploitation of a new source of
renewable energy. Algae can grow in waste or sea water.

Using algae to produce diesel has attracted attention from
several companies. In December Royal Dutch Shell Plc announced
a plan to produce diesel from algae.